The Egyptian pan-Arab television sector is enigmatic in more ways than one. Observers of the Egyptian media know very well that, at heart, it is profoundly more pan-Arab than any other Arab media area. Its pan-Arab reach, however, does not tally with its expectations and, consequently, its market share of the advertising revenues generated at the pan-Arab level keeps it in the minor league.

The market entrance of Egyptian privately owned TV channels came ten years late. Their coming to fruition is dependent in the short and long runs on the lessons that can be learnt from the successes and failures of the Egyptian and other pan-Arab television channels. Equally important from the perspective of advertising revenue generation is an understanding of the mechanics of the pan-Arab market versus those of the local markets.

The entrance of Dream TV, Al Mehwar, and more recently Melody Hits comes at a critical time in the lifecycle of the pan-Arab satellite industry. It is an era that is very much in contrast with that encountered by Egypt Space Channel (ESC) at its inception ten years earlier. In 1992, ESC operated in a competitive arena that was mainly limited to two players: MBC and ESC. Ten years later, Dream TV and Al Mehwar compete with at least three dozen TV channels of different market weights.

In 1992, there was one analogue satellite arena, launched six years earlier by Arabsat. At that time, Saudi TV was the first and only TV channel with a signal on Arabsat, but it simply made no use of it; or, more correctly, could not entice the public to shift to satellite because of the nature of its programs. Arabsat came in handy for CNN's solo performance during the Desert Storm war (1990-1991), when the general Arab public had its first encounter with satellite television. When ECS and MBC were launched in 1992, satellite penetration in the Arab world was practically zero.

In a single, stale, government-owned TV arena that had persisted since TV was brought to the region, the arrival of ECS and MBC was indeed novel. Both MBC and ECS were granted terrestrial re-telecast rights by Kuwait and Bahrain TV stations. Homes across the Gulf Cooperation Council (GCC) markets were queuing up to get seats to watch the TV satellite race.

It was a typical market scenario where supply of satellite television created its own demand. Despite the entrance of the other pan-Arab satellite TV channels in the first half of the nineties, MBC and ESC dominated the race. ESC maintained at least one-third of the audience share across the GCC. MBC controlled about one-half. ESC slotted one-quarter of the advertising revenues generated up until the mid-1990s. Indeed the advertising market then was only a fraction of what is at present.

By the mid-1990s, access to satellite had passed the fifty-percent mark in the GCC markets. But it was time for a turning point in the lifecycle of the industry. LBC, FTV, and Al Jazeera all made a grand entrance. ESC could not keep pace with the new entrants. Even MBC, which had remained a clear step ahead throughout the first half of the 1990s, found it difficult to ward off the offensive of the three new competitors.

It took MBC about another five years to reestablish its clear regional market lead. This was partly because it completely overhauled its product concept. However, it was also in part due to the fact that, while LBC and FTV, the other privately owned TV channels, and especially LBC, had hit the market with full force, both channels, and especially FTV, had lost momentum since 2000. LBC, it is important to note, is now making a comeback.

The Lebanese satellite TV channels lost some of their steam after three to four years of virtual stardom. Al Jazeera has eclipsed other TV channels in certain well-known areas. But in this race ESC has maintained a steady, but also certainly a very slow, pace. While historically it banked on the multi-national Arab audience in the GCC, its present core audience base is the vast Egyptian expatriate population and it has marginal pan-Arab appeal.

The less than average performance of ESC coincided with the launch of Nilesat in 1998. Nilesat ushered the pan-Arab satellite industry into the digital age. Two years later Arabsat entered the digital platform race with Arabsat 3A. Digital satellite entered the GCC at the market saturation point of analogue satellite penetration.

Arguably, the coming of the digital satellites relieved the bottleneck situation caused by the limited capacity of Arabsat 2A, which could barely accommodate two-dozen TV channels. Being on Arabsat 2A had been a necessary condition for reaching the maximum number of homes in the GCC markets but certainly was not sufficient to secure maximum audience share.

This necessary condition still exists but is hardly sufficient. For instance, practically all of the 700 million US$ generated by pan-Arab satellite TV in 2001 is generated by fewer than a handful of the leading pan-Arab satellite TV channels. The share of the Egyptian TV industry, represented by ESC, is limited to 3.5%, a total of 25 million US$ at claimed rate-card value. This compares to a share of 25% in 1993 and 22% in 1995.

The pan-Arab satellite TV sector has come a long way since 1993. While it generated 30 million US$ in 1993, it grew to 714 million US $ in 2001: a phenomenal 2362% increase in nine years. In comparable terms, ESC advertising revenues grew by 257%, from 7 million US$ to 25 million US$ in the same period. Thus, Egyptian TV's comparative market size and sector share of ever-growing regional advertising revenue remain alarmingly low.

The pan-Arab advertising market has been a cornucopia of opportunities that went practically unnoticed until recently by the Egyptian TV sector. Better late than never is an adage that should hold true. However, regaining lost regional ground requires a serious look at issues that seem to be innate to the Egyptian television sector specifically and to Egyptian media in general.

There is no evidence that could be used to counter the argument that Egyptian media could become a regional giant. But less attention is paid to figuring out how to release it fully from its bottle. The current performance of the Egyptian TV sector, as a business entity, shows the limitations of the current genie. A sneak preview of its performance at the national level should give some indications as to why it is flailing regionally.

At the national advertising level, the market share of the TV sector has been losing ground, and fast. For comparative purposes, the share of the TV sector at the total Arab market level has grown from 31% in 1995 to 39% in 2001, a humble 25% increase. The share of the TV sector in Egypt shrunk from a formidable 59% in 1995 to 37% in 2001-a steep 37% drop that defies all rules for growth trends in the TV advertising share, regionally or even internationally.

This drop in the advertising market share of the local market need means shrinkage in the overall size of the advertising revenues generated. Overall, the size the Egyptian TV sector grew from 70 million US$ in 1995 to 170 million US$ in 2001. This 142% increase in advertising revenues in a period of six years was, nevertheless, well below the 191% growth rate experienced by the TV sector for all the Arab markets combined during the same period.

From a business perspective, there is no reason why the local Egyptian TV sector should lag behind its counterparts at the regional level in overall growth. However, the fact that close to 90% of the advertising revenues are generated by Egypt's Channels 1 and 2 illustrates the seriousness of the bottleneck situation, whereby advertisers are trying to reach a population of about 70 million largely through two TV channels.

This bottleneck manifests a number of aspects, particularly the communication wastage where targeted marketing communication is required. This is not to mention those advertisers who may chose to limit their advertising budgets simply because the available vehicles cannot accommodate their communication needs.

Equally important is the fact that this market scenario depicts a severe imbalance between supply and demand of TV channels. The demand for TV channels outstrips the supply, from the perspective of the advertisers as well as the general public. The entrance of privately owned TV channels could right this imbalance but only in the medium and long run.

The relatively slow pace of satellite penetration in Egypt is expected to be one the main limitations. It has taken ten years for satellite access to reach the present level of about 10%. Based on the rapid rate of growth over the past three years, combined with the continuing decline in the cost of satellite access gear, the rate of growth is promising and is expected to double by the middle of the decade.

Satellite penetration is higher than the national average in the urban areas and amongst the affluent segments of Egyptian society. This should give new Egyptian commercial TV channels some breathing space in terms of generating advertising through targeted marketing communications.

Assuming that the new private TV channels have their product concepts right, they can compete with Egypt's Channels 1 and 2 within the arena of satellite-owning homes. But this limited national arena is not expected to generate enough advertising revenue to allow them to grow and eventually compete regionally.

"[T]he most critical challenge in the short run is for these TV channels to be capable of passing the regional test and competing with the major-league pan-Arab satellite channels."

Hence the most critical challenge in the short run is for these TV channels to be capable of passing the regional test and competing with the major-league pan-Arab satellite channels. Within Egypt, the arena for TV competition is limited at present to 10% of homes, as defined by the current level of satellite penetration. Regionally, and in the GCC markets in specific, it is limited to about 33% of digital satellite-owning homes. Pan-Arab satellite channels in the major league enjoy a penetration of over 80% as analogue satellite penetration had already reached market saturation by the end of the 1990s. The potential reach of TV channels on digital platforms is expected to cross the 50%-mark by 2005.

The potential expansion of the digital satellite platform is not a sufficient condition for being fit for regional competition. Officially, ESC is in the major league, but mostly for its historical presence. Being a state-owned TV station need not be the only reason why ESC did not remain on a par with MBC, LBC, or other TV Channels. The most critical, and often-overlooked, aspect is the need to find a balance between local and regional TV viewing needs.

Given the sheer population size of Egypt, which is more than double that of the GCC, for instance, it is understandable that in proportionate terms national Egyptian issues would dominate. We would also have to take into account the comparative vastness of the Egyptian entertainment industry, whose production does by default dominate airtime on the Egyptian TV channels. The extent of the pan-Arab appeal of the Egyptian TV sector should not be based on the quality and the variety of their respective programming mix from a national context but rather on the extent to which they can strike a balance between local/national and pan-Arab TV viewing needs.

Should the Egyptian private TV channels be subsumed by local TV production and an Egyptian flavor, they are bound to lose the regional race. This is from the viewers' perspective. Equally important is the advertisers' perspective. Advertising budgets are still segmented by region. While the GCC markets are increasingly becoming one region, thanks to pan-Arab satellite TV, Egypt, Lebanon, and others are still very much on their own. Even international brands could not care less if there is advertising spillover into other markets. Marketing managers in the GCC are accountable for their market performance in their own assigned markets.

ESC for instance is attracting a mix of regional and local advertising. In contrast, key advertisers on the private Egyptian channels are still national Egyptian brands. While it is understandable that these channels should have to accept local advertising, the dominance of local brands, as opposed to those that target pan-Arab consumers, is bound to enhance their image as national rather than pan -Arab channels.

This is a sort of catch-22 situation. In order to sustain their presence as viable businesses, local advertising is the only immediate lifeline. But in the medium and long run, their continued dominance by local advertising may mean that this umbilical cord could eventually choke their potential to generate pan-Arab advertising revenues.

There are promising signs that Egypt's private commercial channels could have pan-Arab appeal. Exploring their full potential is only possible if they are able to step out of their national shell. This applies equally to the state- owned TV channels. The regional predicament the Egyptian TV sector is experiencing is that of the Egyptian media as a whole. It also applies to each of the 22 other local Arab media.

In most instances, viewers find themselves up against very local settings, exacerbated by heavy local colloquial Arabic. The fact that Hajj Mitwalli, an Egyptian drama, was a pan-Arab hit during Ramadan of 2001 need not be regarded as a triumph for Egyptian drama. Some have strongly argued that it is, rather, a triumph for the social ills of pan-Arab culture. With the predominant presence of one main character depicted by Hajj Mitwalli, viewers were left with no other role model in the series that could uphold more positive values other than having four wives, with the business principle that more is better.

In an age of pan-Arab TV media, only very few pan-Arab TV channels have succeeded in performing to a regional audience. The Lebanese TV channels are still in a seesaw situation. The so-called appeal of Lebanese culture seems to have faded somewhat. LBC and FTV each have a different terrestrial and satellite programming mix. This is one practical way of shedding certain layers of their local/national skin.

In contrast, and despite the increased regional appeal of Syrian drama, Syria Satellite TV has kept itself out serious regional competition. While it has the potential for good locally produced programming, its players do much better as members of other regional teams. Syria Satellite TV presents a classic instance of pan-Arab audiences being still more channel- than program-oriented.

Short on locally originated program concepts, all major pan-Arab satellite TV channels are adopting internationally successful TV program concepts. Indeed, MBC had a scoop with Who Wants to be Millionaire. It is increasingly evident that a successful TV program mix has to be balanced between TV productions of more than one Arab entertainment market and western entertainment, all within pan-Arab packaging.

This requires heavy capital investments, which are not available to the any of the new market players, be they Egyptian or other. Further, behind each of the main pan-Arab TV channels a well-oiled marketing machine that aggressively goes after regional advertising dollars is needed.

For the Egyptian entertainment industry marketing, in the market economy sense, is still in its incubation period. It is a factor that has been dictated by the economy as a whole, as it has just started to release itself from the heavy hand of state control. The Egyptian entertainment industry, by far the oldest and possibly the most experienced in the Arab world, has yet to learn how to perform well to the notes of the market economy.

In the process of still being weaned from the state, as an adult, Egypt's (Misr) entertainment industry lost a once-in-a-lifetime chance of being the Mollywood of the Arab world. Bombay realized this potential long ago and was bold enough to adopt its own parallel to Hollywood. Bollywood is now a thriving entertainment city.

A version of Mollywood could be possible once Egypt, the Arab media giant, fully releases itself from its bottle. Fantasy genies do not work in this instance. Business-minded people with a good vision of how to create a balance between local and pan-Arab appeal might.